If a solicitor undertakes to do something, does that make it a “solicitor’s undertaking”? This was a question that was recently considered by the Supreme Court in London.
This case stemmed from the Volkswagen emissions scandal, and both parties are law firms involved in group actions.
Your Lawyers Ltd (YLL) had gathered around 4,000 litigants and sought after-the-event (ATE) insurance to cover the risk of adverse costs. Their broker suggested a collaboration with Harcus Sinclair LLP (HSL). YLL sent a draft non-disclosure agreement (NDA) to HSL, which was signed and returned with some amendments. The NDA included a non-compete clause:
The Recipient further undertakes not to accept instructions for or to act on behalf of any other group of Claimants in the contemplated Group Action without the express permission of [YLL]
Meanwhile, HSL gathered its own group of litigants and secured ATE insurance. It then met with a third law firm to discuss a collaboration.
YLL subsequently failed to secure ATE insurance, and HSL, through a subsidiary, entered into a Co-Counsel agreement with the third law firm. This raised several questions, including whether the non-compete clause was unenforceable as an unreasonable restraint of trade.
The High Court said “yes”. The Court of Appeal said “no”. Cue to Supreme Court.
The Supreme Court agreed with the High Court. They then considered whether the non-compete clause was a “solicitor’s undertaking”, which is essentially a promise to do, or refrain from doing, something as a part of ordinary professional practice as a solicitor.
The value of a solicitor’s undertaking stems from their status as an officer of the court, and it is often engaged in property transactions to get a deal across the the line.
It is clearly correct that solicitors’ undertakings are enforceable, under the courts’ inherent supervisory jurisdiction, even though they may not be contractually binding.
An incorporated practice, in this case an LLP, is not an officer of the court and therefore cannot give a solicitor’s undertaking.
…the non-compete undertaking given by [HSL] is not unenforceable as an unreasonable restraint of trade; that it was not a solicitor’s undertaking; that, if it was a solicitor’s undertaking, it would not have been enforceable under the court’s summary jurisdiction over its officers against [HSL] because [it] is not an officer of the court or against [the solicitor] as it was not given by him in a personal capacity; that it would not have been enforceable if it had constituted an unreasonable restraint of trade, and that its status as a solicitor’s undertaking is of little relevance in determining whether it constitutes a restraint of trade.
Although this may be the final word on this case, the UKSC did raise the broader question of solicitor’s undertakings and incorporated practices:
We therefore express the hope that Parliament will consider the lacuna that this judgment has confirmed in relation to undertakings given by solicitors working for incorporated law firms, particularly LLPs.